What Defines a Non-Profit? Part I

Non-profits rescue abandoned dogs and cats. They teach children how to read. They supply water to remote villages. They use fundraising software to collect donations and then pass on microloans to entrepreneurs in developing economies.

Non-profits help people and communities in just about any way you can imagine, but what makes a non-profit a non-profit?

How Do You Know It’s a Non-Profit?

Non-profit organizations are tax-exempt groups that benefit the general public.

That’s the simple answer. The more detailed answer is that it comes down to tax law. Unlike for-profit companies, non-profits have tax-exempt status under Internal Revenue Code Section 501(c)(3).

The reason they qualify for special treatment is because they do not operate on a profit motive. Instead, they provide services that benefit the wider public.

Types of Tax-Exempt Groups

More than 1.4 million organizations in the U.S. claim tax exempt status under 501(c). They come in at least 25 different varieties. The most common type is a 501(c)(3) non-profit.

There are also different types of 501(c)(3) organizations. They can be public (e.g., the Red Cross) or private (e.g., family foundations or corporate foundations).

The unique thing about a 501(c)(3) is that anyone who donates to their cause can claim a tax deduction. That makes it easier for non-profits to raise funds that help them carry out their important work.

Passion Meets Technology

Fundraising for non-profits doesn’t need to be a logistical nightmare. With Process Donation’s free fundraising software for nonprofits, it’s easier than ever to crowdsource your way to robust growth.